California Bill Eliminating Credit Checks by Employers during Hiring Process Passes State Assembly and Heads to Senate

A bill in California – AB 22 – sponsored by Assemblymember Tony Mendoza (D-56th District) that would ban the use of credit report background checks by employers during the hiring process has passed in the State Assembly with a vote of 45 to 29 and now heads to the Senate Labor and Industrial Relations Committee. Mendoza’s earlier attempts at similar legislation in the past – AB 482 (2010) and AB 943 (2009) – were both vetoed by former Governor Arnold Schwarzenegger.

“A credit report is an unfair lens through which to view job applicants,” Mendoza stated in a press release. “This bill will simply remove an unnecessary barrier to employment for those seeking everyday work opportunities.”

AB 22 would prohibit an employer, with the exception of certain financial institutions, from obtaining a consumer credit report for employment purposes such as employment credit checks but with exemptions that include the following:

  • Any position with the State Department of Justice;
  • A sworn peace officer or other law enforcement position;
  • Any position for which the information contained in the report is required to be disclosed by law or to be obtained by the employer.
  • The remaining exemption includes any managerial position where a credit report would be substantially job-related, meaning that person would be a manager and have access to money, assets, or confidential information.

Specifically, as amended, AB 22 is an act to add Chapter 3.6 (commencing with Section 1024.5) to Part 2 of Division 2 of the Labor Code, relating to employment.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1.  Chapter 3.6 (commencing with Section 1024.5) is added to Part 2 of Division 2 of the Labor Code, to read:

CHAPTER 3.6.  EMPLOYER USE OF CONSUMER CREDIT REPORTS

1024.5.  

(a) An employer shall not use a consumer credit report, as defined in subdivision (c) of Section 1785.3 of the Civil Code, for employment purposes unless the following criteria are satisfied: (1) The information contained in the report is substantially job-related, meaning that the position of the person for whom the report is sought has access to money, other assets, or confidential information. (2) The position of the person for whom the report is sought is any of the following: (A) A managerial position. (B) A position in the state Department of Justice. (C) That of a sworn peace officer or other law enforcement position. (D) A position for which the information contained in the report is required to be disclosed by law or to be obtained by the employer.

(b) This section does not apply to a person or business subject to Sections 6801 to 6809, inclusive, of Title 15 of the United States Code and state and federal statutes or regulations implementing those sections if the person or business is subject to compliance oversight by a state or federal regulatory agency with respect to those laws.

(c) For purposes of this section, “managerial position” means a position held by a person who has authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of this authority is not of a merely routine or clerical nature, but requires the use of independent judgment.

As reported earlier in the ESR News blog ‘Many US States Considering Bills Limiting Use of Credit Reports for Employment Screening Background Checks,’ while only five U.S. states – Hawaii, Washington, Oregon, Illinois, and most recently Maryland – currently have laws limiting or prohibiting credit checks on job applicants and employees, lawmakers in the following states have proposed legislation restricting the use of credit reports for hiring: California, Connecticut, Florida, Georgia, Indiana, Kentucky, Michigan, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, Ohio, Pennsylvania, Texas, and Vermont.

“Employers should not use credit report checks unless there is a clear business justification related to the job in question since some credit reports may contain errors,” says Attorney Lester Rosen, CEO of Employment Screening Resources (ESR) and author of ‘The Safe Hiring Manual,’ a comprehensive guide to employment screening.

To help job applicants understand credit checks, ESR and The National Association of Professional Background Screeners (NAPBS), a professional trade organization for the background background screening industry, co-authored a white paper: ‘The Use of Credit Reports in Employment Background Screening: An Overview for Job Applicants.’

To read California Assembly Bill AB 22, visit: http://e-lobbyist.com/gaits/text/290685. For more information about background checks, visit the Employment Screening Resources (ESR) website at http://wwwESRcheck.com.

About Employment Screening Resources (ESR): Founded in 1997 in the San Francisco area with a mission to help employers and employees maintain safe workplaces, Employment Screening Resources (ESR) is accredited by The National Association of Professional Background Screeners (NAPBS®) and provides industry leading technology, legal compliance, service, turnaround, and accuracy. ESR also wrote the book on background checks with ‘The Safe Hiring Manual’ by founder and President Lester Rosen. For more information about ESR, visit http://www.ESRcheck.com.

Sources:
http://e-lobbyist.com/gaits/text/290685
http://asmdc.org/members/a56/news-room/press-releases/item/3051-assemblymember-mendozas-bill-to-eliminate-employee-credit-checks-passes-assembly
http://www.napbs.com/files/public/Consumer_Education/Credit_Reports_for_Background_Screening.pdf